Planning to buy a house and maybe rent out

vincentt

Thanks for your help guys!

BitterAndTwisted

Scenario one means that you are the landlord and they are lodgers. Source you own people to live with you. Anything else would be stupid and pointless. Do not contemplate scenario two.

kingstreet

Scenario 2 as B&T has looked at scenario 1.

Assuming you need a mortgage, you'll struggle to get a BTL mortgage without already owning a property. Lenders don't like borrowers who don't already have a property/mortgage.

The rental income you receive is taxable income. The mortgage interest payments (but not capital) together with letting costs and repairs etc can be offset against the rental income to reduce your taxable income from the rent (but not from your other income). Interest payments to your payments can be offsetr for tax purposes. Capital repayments can't - same as the mortgage.

If you sell the property and make a gain, the gain is taxable under Capital Gains rules, subject to your usual annual allowance.

Werdnal

Not only the biggest transaction of your life, but possibly the most costly in financial losses and legal action if you get letting wrong.

As well as points in replies above, do you fully understand all the legal aspects of letting a property?

Also, you need to have a cash contingency for repairs, unforeseen costs, voids when you have no tenants etc. If you are already commited to paying back a deposit loan, would you really have a strong enough financial footing to make this work?

vincentt

BitterAndTwisted wrote: »

Scenario one means that you are the landlord and they are lodgers. Source you own people to live with you. Anything else would be stupid and pointless. Do not contemplate scenario two.

sorry, i dont understand what you are saying...
are you saying that i should source my own tenants? in scenario 1, my friend effectively renting the whole house. how they choose to "use" the house is up to them.. i dont really need to live there tbh.

Werdnal wrote: »

Not only the biggest transaction of your life, but possibly the most costly in financial losses and legal action if you get letting wrong.

As well as points in replies above, do you fully understand all the legal aspects of letting a property?

Also, you need to have a cash contingency for repairs, unforeseen costs, voids when you have no tenants etc. If you are already commited to paying back a deposit loan, would you really have a strong enough financial footing to make this work?

I can start paying back the loan as well. the main thing is tax. i plan to do it legally, but trying to reduce the taxes.

Werdnal

vincentt wrote: »

sorry, i dont understand what you are saying...
are you saying that i should source my own tenants? in scenario 1, my friend effectively renting the whole house. how they choose to "use" the house is up to them.. i dont really need to live there tbh.



I can start paying back the loan as well. the main thing is tax. i plan to do it legally, but trying to reduce the taxes.

I don't think you quite understand that letting a property is not pure income, profit or about making money. There are costs, you can make losses, you need to comply with laws to keep the property repaired and maintained, health and safety requirements etc. Some of these costs can be offset against the tax you pay. There are no ways to reduce it - you declare it and the costs that are allowable and the tax man tells you what you owe them - simples!

Then there are tenants who use, abuse and trash the place, don't pay rent, leave it in a state, or refuse to leave at all and you have to take them for court and get the bailliffs in.

I think before you start worrying about tax, you should find out what being a landlord and owning a property is all about. Its not a get rich quick scheme, and many soon find out the hard way that it goes pear-shaped very quickly if you don't learn the rules and comply with the laws first!

G_M

1st you must understand the difference between a lodger (sharing the property with their landlord) and a tenant (occupier the whole property).
A lodger has few rights, a tenant has many.

So if YOU live there, you are renting to a lodger. See here for Rentaroom scheme re tax.

If you rent the whole property and do NOT live there, then do NOT rent to friends/family. Only rent to people you will be willing to evict, and whose friendship you are not concerned about losing.

And read here.

Do the research - about tax, law, practicalities, agents, documemntation etc. You will never learn enough just asking the odd question here, and getting answers to limited questions. Use all the links in my post to educate yourself fully and then make an informed decision.

neverdespairgirl

vincentt wrote: »

I will be borrowing a deposit loan from bank of mom and dad, if i used surplus rent to pay them back is that taxed?

Have you checked to see if you can get a mortgage with a loan as a deposit? Very unlikely, at the moment.

quantic

I like the ambition you have but judging by the comments you have made so far I think this could end up being the biggest mistake of your life. I personally think its important that people save up their own deposit because by the time they have they have often learned a lot of lessons.

00ec25

scenario one where you have 3 occupants in the property is bordering on HMO status and will therefore depend on what your specifc council requires in terms of fixtures and fittings in the property (fire doors, hardwired fire alarms etc). Alternatively they may not require anything extra but ypou would be foolish not to check

allowing your lodger to sub let is just silly, it's your house you keep control otherwise it would be potentially messy if you want to evict the sub letter

scenario two - as a FTB this will not be possible because you will struggle to get a BTL mortgage since you do not already own a property yourself

BTW - of course you will pay tax, rent is a source untaxed income and must be declared. Under scenario 1 with one (or more) lodgers you get at total of £4,250 per year tax free, then pay tax on everything over that amount

vincentt

thanks for the advice guys. i think i should probably do a lot more research then. sorry just started work and wanted to get onto the property ladder lol.

i will have my own deposit in about 10 years